Nikkei back above 40k – CN stimulus nerves?

Asia Market Update: Nikkei back above 40k; CN stimulus nerves?; Waiting game continues for Israeli strikes against Iran even as WTI falls.

General trend

- The Nikkei reopened to lead Asia following yesterday’s holiday to be up over 40k for the first time since July 19th: Chipmakers such as Tokyo Electron +5% after +3% gains in Nvidia overnight

- USD/JPY fell just short of 150 in overnight trading. Japanese bond yields back to their levels of Aug 2nd, prior to the Aug 5th Monday meltdown.

- Both Hang Seng and Shanghai under-performed, despite rest of Asia being well in the green. Overnight China promised a further issuance of CNY6T of treasury bonds over 3 years, including ultra-long bonds to help local governments resolve debts.

- Later, the WSJ cited sources that China's new support measures are intended by Pres Xi to avert a financial crisis, not veer too far from his agenda, and put a floor under growth. USD/CNH fell to levels not seen since first part of September.

- Meanwhile in the real economy, China trade balance for September showed a marked decline in exports and imports, indicating weak demand both externally and internally, while China credit data also saw further weakening of loan growth to a new record low in September.

- WTI crude oil fell heavily before the Asian open on reports that Israeli PM Netanyahu reportedly told US officials that Israel will strike Iran military and not nuclear or oil targets. This was on top of earlier reporting that Iran recently conveyed a message to US through a third country that if the Israeli response to the Iranian missile attack is limited, then Iran will see this round as closed. However, during Asia trading Netanyahu's office released a statement: “We listen to the opinions of the US, but we will make our final decisions based on our national interest” - thus appearing to keep the door open for all options. WTI kept falling to 2-week lows.

- Australia ASX 200 hit a fresh record high.

- New Zealand house prices rose in September for the first time since April, while RBNZ Dep Gov Hawkesby said that the cash rate in New Zealand is headed toward neutrality. New Zealand’s Q3 CPI release tomorrow.

- US equity FUTs +0.1% during the Asia session.

Looking ahead (Asian time zone)

- Tue Oct 15th (Tue eve DE Oct ZEW Econ Sentiment).

- Wed Oct 16th NZ Q3 CPI, JP Aug Machine Orders, PH+Th+ID Rate Decisions, (Wed eve UK Sept CPI).

- Thu Oct 17th JP Sept Trade Balance, AU Sept employment, (Thu eve EU Final Sept CPI, ECB rate decision, US Sept Retail Sales).

- Fri Oct 18th JP Sept National CPI, CN GDP/Industrial Prod/Retail Sales/FAI (Fri eve US Sept prelim Building Permits).

Holidays in Asia this week

- Mon Oct 14th Japan, Thailand.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens +0.2% at 8,267.

- Reserve Bank of Australia (RBA) commences review into retail payments regulation.

- Australia sells A$100M v A$100M indicated in 0.25% Nov 2032 Indexed Bonds: Avg Yield 1.8566% v 1.5120% prior: bid-to-cover: 4.61x v 3.74x prior (Aug 27th, 2024).

- RBNZ Dep Gov Hawkesby: Cash rate in New Zealand is headed toward neutrality; The pace of the rate of decline will rely on the data - speech on financial stability at INFINZ conference.

- New Zealand Sept REINZ House Sales Y/Y: -1.1% v -0.7% prior; Aug Median House Price NZ$781K, +2.1% m/m, -2.3% y/y.

- New Zealand Fin Min Willis: Confident in overcoming New Zealand's structural budget deficit.

China/Hong Kong

- Hang Seng opens -0.2% at 21,046; Shanghai Composite opens -0.6% at 3,265.

- China's new support measures intended by Pres Xi "to put a floor under growth"; Goal is to avert a financial crisis, not veer too far from his agenda - WSJ, citing sources.

- Follow up: China banks said to consider deposit rates as early as this week - press.

- ~85% of China mutual fund managers were optimistic about Q4 A-share performance – Shanghai Securities News survey.

- China said to (further) move to tax the 'ultra-rich' for overseas investment gains - US financial press.

- Reportedly China may issue CNY6T in treasury bonds over 3 years; Ultra long bonds to help local govts resolve debts – press [overnight update].

- China Sept YTD aggregate financing (CNY): 25.66T V 25.475TE [overnight update].

- China Sept YTD new Yuan loans (CNY): 16.02T V 16.490TE [overnight update].

- China Sept M2 money supply Y/Y: 6.8% V 6.4%E [overnight update].

- China Sept trade balance: $81.7B V $90.5BE [overnight update].

- BYD Exec: Will produce almost all our European EVs in Hungary; Will assemble battery packs in Europe except for the cell; Cell is still from China - Paris Auto Show [overnight update].

- Commission Pres Von Der Leyen: We are negotiating with China on what compensation could be, such as price commitments or investments in Europe [overnight update].

- (DE) German Chancellor Scholz: Hopeful for negotiated solution on Chinese EV tariffs by end of this month [overnight update].

- (HK) Former Macau judge Sam Hou Fai was elected as Macau's new leader - press [overnight update].

- China PBOC sets Yuan reference rate: 7.0830 v 7.0723 prior (weakest since Sept 19th).

- China PBOC Open Market Operation (OMO): Injects CNY68B in 7-day reverse repos; Net injects CNY26.6B v net injects CNY19.5B prior.

Japan

- Nikkei 225 reopens +1.1% at 40,047 (post one-day holiday).

- Japan Aug Final Industrial Production M/M: -3.3% v -3.3% prelim; Y/Y: -4.9% v -4.9% prelim.

- Japan PM Ishiba: Looking to compile FY25 supplementary budget exceeding prior FY24 - Japanese press.

- Japan regulator [FSA] reportedly to scrutinize Japanese megabanks' lending to US Funds [includes private equity and other funds] - US financial press.

Korea

- Kospi opens +0.3% at 2,632.

- South Korea Sept Import Price Index M/M: -2.2% v -3.5% prior; Y/Y: -3.3% v 1.8% prior.

- Follow up: North Korea blows up parts of inter-Korean roads; South Korea conducted 'counter-shooting' South of the border - South Korea military.

Other Asia

- Thailand Fin Min Pichai: Lower key rate will help inflows and Thai baht; Wants to see faster economic growth.

- US Pentagon: China's military operation near Taiwan is "irresponsible, disproportionate, and destabilizing".

- India Sept CPI Y/Y: 5.5% V 5.1%E [overnight update].

North America

- Follow up: US said to consider capping Nvidia and AMD AI chip exports to some countries, with a focus on the Middle East - financial press.

- (US) Fed's Kashkari (non-voter for 2024 and 2025): We've made a lot of progress on inflation; The labor market is strong; There's a lot of evidence that inflation will fall further from here - Fireside chat.

- (US) Fed's Kashkari (non-voter for 2024 and 2025): Economy's in the final stages of getting inflation back to 2%; Further modest reduction in rates is appropriate.

- (MX) Mexico Interior Min: Mexico to elect 850 judges on June 1, 2025.

Europe

- (IL) Israel PM Netanyahu's Office: We listen to the opinions of the US, but we will make our final decisions based on our national interests - financial press.

- (IL) Israel PM Netanyahu reportedly tells US officials that Israel will strike Iran military and not nuclear or oil targets - Washington Post.

- (IL) Reportedly Iran recently conveyed a message to US through a third country that if Israeli response to the missile attack is limited, then Iran will see this round as closed - Israeli press.

- (UK) PM Starmer: Must deal with inherited black hole in the budget; Have had to signal that tough decisions are coming - press interview.

- OPEC Monthly Oil Report (MOMR): Cuts 2024 global oil demand forecast from 2.03M to 1.93M bpd.

Levels as of 01:20 ET

- Nikkei 225 +1.0%, ASX 200 +0.8%, Hang Seng -2.6%; Shanghai Composite -1.4%; Kospi +0.5%.

- Equity S&P500 Futures +0.1%; Nasdaq100 +0.1; Dax +0.1%; FTSE100 -0.1%.

- EUR 1.0889-1.0911; JPY 149.44-149.84; AUD 0.6705-0.6733; NZD 0.6078-0.6097.

- Gold -0.3% at $2,656/oz; Crude Oil -3.8% at $71.03/brl; Copper -1.0% at $4.3573/lb.